Government Shutdown Ends — But the Damage Doesn’t
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What is the main topic discussed in this episode?
Today's number six. That's how many days old Mary Stewart was when she became Queen of Scotland. That makes her one of the least qualified leaders in history, just behind Linda McMahon. How do you market bad? If money is evil, then that building is hell.
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Welcome to Prof G Markets. I'm Ed Elson. It is November 13th. Let's check in on yesterday's market vitals. The Dow hit another record ahead of the shutdown vote in the House. The SP 500 was flat and the Nasdaq declined. Meanwhile, the yield on tenure treasuries fell. Bitcoin dropped towards the key $100,000 range and finally gold climbed. Okay, what else is happening? The Trump administration has proposed a new idea to tackle home affordability: the 50-year mortgage loan. Right now, most first-time home buyers take out a 30-year mortgage. According to administration officials, a 50-year mortgage would lower monthly payments, helping new buyers enter the market. However, many housing experts say that the monthly savings on those
Payments would be small and homeowners would wind up paying actually a lot more in interest. Interesting. So we wanted to break down the economics of this 50-year mortgage proposal. So we're speaking with Ramit Seti, host of the Money for Couples podcast and best-selling author of I Will Teach You to Be Rich. Ramit, thanks for joining us again on Profit Markets.
Thanks, Ed.
We wanna get your reactions to the fifty year mortgage. I know you have a lot of takes and a lot of opinions that are very polarizing on home ownership. I see this headline. Trump wants to have fifty year mortgages, or at least that's being floated. Uh I I just I gotta get your take on this. What do you think?
Well, what do you say to pathetic politicians who simply want to at any cost keep the price of housing going up? What do you say to a government that essentially says to people, hey, if you can't afford a $450,000 Rolls Royce, how about we spread those payments out over 50 years? And how do you reconcile that with a public that has the number one religious in this country being home ownership, who many people jump and say, wait, lower payments? Sounds good to me. We have a very bad policy here, very bad recipe for the average American consumer. It's one of the worst policies I've heard in recent years, and that's really saying a lot.
Break down w what the what the the grift kind of is here, because you described i it is lower payments, but spread out over a long time. Why exactly is that bad?
The concept of interest is a word that many people generally understand, but they rarely understand the specifics. We know that we pay interest on a mortgage, okay, but the math is extremely counterintuitive. You take a typical $500,000 house at six or so percent for 30 years, okay, fine, that's one thing. You'll pay about $3,000 a month. If you have a 50-year mortgage for the same house, you're going to save about $300 a month. People go, wow, that sounds good. But what they don't pay attention to is the fact that they're going to pay an extra half a million dollars in interest. Right. The American consumer typically does not understand how mortgages work. That's why they are so profitable for Wall Street.
And this is yet another way to make more money off of consumers.
What is the 50‑year mortgage proposal and why is it being floated?
consumers who do not understand basic math.
Why do you think they are proposing this? I've seen some rumors about why someone came to him and had a list of presidents. Yes.
Yeah, that guy, I mean, that guy's under investigation for several different things. The guy's a nut. He's horribly conflicted. And then let's take the recipient who gets an index card and then goes, sounds like great national policy. Post it. In addition to that, we have a general historical US government policy of propping up home ownership rates. And this is really important. The goal is not to simply increase the home ownership rate. That should never be the goal. Because if you just want to juice the numbers, you can. We've seen that happen before in the last recession. You can simply make mortgages available to less qualified people, all in the hopes of increasing that one number.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–3:38
2
What is the 50‑year mortgage proposal and why is it being floated?
3:38–6:12
3
How does Ramit Sethi evaluate the economics of a 50‑year mortgage?
6:12–10:27
4
Why could a 50‑year mortgage end up costing borrowers more in interest?
10:27–16:57
5
What does the “religion of homeownership” mean for American buyers?
16:57–31:47
Speakers
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